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FX Analysis

USD/CAD still evolving within a short-term downtrend as CPI looms


USD/CAD still evolving within a short-term downtrend as CPI looms

Short-term technical analysis 

(click to enlarge chart)

(click to enlarge chart)

Time stamped: 18 Jan 2022 at 12:00pm SGT

Source: CMC Markets

  • Canada inflation data (CPI) for December will be release on Wednesday, 19 January at 1330 GMT where the consensus forecast is set at 4.8% y/y (close to a 19-year high), slightly higher than 4.7% recorded in November.
  • Since its 20 December 2021 high of 1.2964, the USD/CAD has evolved into a short-term downtrend phase reinforced by the bearish breakdown of a short to medium bearish reversal configuration called, “Head & Shoulders” on 12 January 2022.
  • The current short-term downtrend has recorded a loss of -511 pips since its 20 December 2021 high to 13 January 2022 low of 1.2453. The key resistance to watch now to maintain the current potential short-term downward trajectory of the USD/CAD will be the 1.2620 key medium-term pivotal resistance (the former neckline support of the “Head & Shoulders”).
  • If 1.2620 is not surpassed to the upside, the USD/CAD may continue its potential impulsive down move sequence towards the next supports at 1.2380 (the minor swing lows area of 4 November 2021 & 10 Nov 2021) follow by 1.2300/2288 next within its short-term downtrend phase (potential exit target of the “Head & Shoulders” bearish breakdown, lower boundary of the descending channel & a cluster of Fibonacci expansion levels).
  • On the flipside, a clearance with a 4-hour close above 1.2620 invalidates the short-term bearish scenario for a squeeze up towards the next resistance at 1.2710 (upper boundary of the descending channel & 50% Fibonacci retracement of the current down move from 20 December 2021 high to 13 January 2021 low).
  • Also do note that from a longer -term perspective (1 to 3 months’ time frame), the trend of USD/CAD remains in a sideways configuration between 1.3020 and 1.2060 (see weekly chart).

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